Power And Dollar

What Does Obama’s Oil Tax Tell Us About Our World Economy?

Democrats are always weak on economy and defense.  However, Obama is from Chicago School.  Will that cover the weakness on the economy issue or defense/foreign affairs?  His VP choice will tell us a bit of what he thinks.  Economy always tops the list of election issues, especially when the economy dives south.  Obama already raises the issue of oil companies’ profit and claims the summer gas tax relief is a gimmick.  Summer gas tax relief is as much of a gimmick as taxing the oil companies like Exxon.  However, Obama’s idea of taxing oil companies indicates a politico-economic trend we will have to face due to higher oil prices: nationalizing or stringent regulation on vital businesses.

 

Oil prices are now hovering $150 US dollars.  There are plenty of articles out there to justify how it got to this price or even why the price will fall like the real estate prices.  With a high price like that, oil exploration business has such a long term investment cycle, oil wells are not “produced” anywhere and oil being a vital input for an economy, this business has a heavy politics component in it.  Therefore, the following is the trend we will have to live:

 

More and more governments will nationalize the oil exploration business.  Venezuela nationalized the oil not because he is a mad man (he did not nationalize everything, did he?) but because Venezuela, as an institution, needs to influence the buyer(s) of its oil, i.e. US of A.  Russia has been removing foreign oil companies step by step for the same reason.  If any government simply wants more revenue for their programs or even for their politicians’ wallet, the government can simply tax those exact companies or everyone to make the desired amount.  There usually 2 reasons to nationalize a business: domestic needs or foreign relations needs.  

 

Wealth will get increasingly gravitated toward the resources companies.  Oil is just the most high profile one in US.  This similar situation may happen to Thai on rice distribution business (in fact it is happening).  In order to pacify the domestic political needs to this wealth movement toward such a small group of people, governments tend to employ the easiest political solution: nationalize it in front of their TV box as homework for doing something.  

 

In terms of foreign relations, countries realize their resource export has such a big impact on the buyer country, in the example of oil.  So, a country like Venezuela gets a lot more chips against the States just because they produce oil (although I have never done research what Venezuela actually wants).  This is the same for Saudi.  Saudi is the chief broker of the States because it is the biggest seller of oil to the States.  

 

Now that we recognize this trend, what does it matter?

 

This is the same situation for food.  Philippines are stopping its rice export sales in order to make sure domestic demands are met.  Thailand is instituting price controls.  Indonesia is also having problems with rice.  With both China and India are big consumers of rice, no wonder Thailand would have proposed the idea of rice cartel.

 

Thailand quickly withdrew that idea.  However, the point hit home.  The food shortage will create as much problems years ahead.  And this problem will be concentrated on developing world, weaken their governments’ mandates and push more people and subsequently their governments to take more desperate actions.

 

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June 10, 2008 - Posted by | Barack Obama, business, Current Events, economics, election, Election 2008, obama, opinion, politics, Thoughts, wordpress-political-blogs

7 Comments »

  1. Obama raising oil taxes on the companies will be relay right down here to us at the pumps! He is not very good at making decisions, using poor judgement most the time.
    He is now trying to keep the American people from hearing the truth.
    http://goodtimepolitics.com/2008/06/09/barack-obama-sets-up-internet-war-room/

    Comment by goodtimepolitics | June 10, 2008 | Reply

  2. “(he did not nationalize everything, did he?)” He’s trying. He has massive price controls on staples such as milk and he recently nationalized cement and steel industries.
    Nationalization is inherently un American and is so partly due it’s infringement on the principle of liberty. One could apply this to the possibility of a national health care program also proposed by BO. The oil tax is wider in it’s scope also. I firmly believe the Dems believe they can bully the oil companies due to pump prices and ironically use that to push taxes that will only increase prices. The purpose of the taxes are a false green initiatives and social engineering in nature. They think $7.00/gallon gasoline will result in less cars=less CO2. The truth will be Economy = 0 taxes + job loss=revolution

    Comment by Alfie | June 10, 2008 | Reply

  3. He is able to nationalize everything. And he has not nationalized. A dictator would jump if his status update report that says “trying” and he would be pushing his nuclear button to make it to “mission accomplished”.

    That’s why I say it is a gimmick.
    $7/gallon would work if, say, the personal exemption is increased at the same time, for example $8k instead of $4k.

    Comment by royho | June 10, 2008 | Reply

  4. Now that brings up a good subject! I sure would not want Obama in charge of the nuclear button, when he has made so many mistakes on which and how to push voting buttons in the past! By his own words he said he made mistakes! Holy Cow what was that going up so fast? 🙂

    Comment by goodtimepolitics | June 10, 2008 | Reply

  5. The insane trend in the US toward using food products to make fuel for cars is exascerbating the food shortage problem, too.

    Comment by redstaterighthand | June 12, 2008 | Reply

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